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Uncertainty is inescapable.
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I agree, uncertainty is
really a fact of life.
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Many of our decisions,
certainly long term decisions,
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like buying a house, or
taking under real uncertainty
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in other risks.
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That's true.
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But it's unbelievable
that this is not
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taken into account in many
models of the economy,
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and many models of society,
because this fact really
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needs another approach.
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Another approach to economics.
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There, I unfortunately
disagree with you,
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because I think it's completely
understandable why, even though
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while we acknowledge that
uncertainty is important,
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that in scientific
analysis we have difficulty
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with dealing with uncertainty.
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Because if one allows
for true uncertainty,
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one often hears rightly, I
think, that anything might go
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and there's no need
for models anymore
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or predictions
become impossible.
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So it seems at odds with
scientific analysis.
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That I find really unbelievable
and illogical, to be honest.
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You agree that uncertainty
is a fact of life.
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So that means that people in
the past had to deal with it,
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have to deal with
it now, and will
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have to do with
it in the future.
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Yes, religion is
also a fact of life,
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but it's not scientific maybe.
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So I think there are
many things in life which
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are not scientific necessarily.
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So acknowledging that it
is important is one thing,
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dealing with it in an academic
way is really a challenge,
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I think.
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No, but you make not a
distinction out of it.
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You forget that there's a
difference between a religion,
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for instance, and
uncertainty, and studying
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how people deal with
it to understand
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how people deal
with uncertainty.
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This can't be-- it's liable
to a scientific analysis.
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You can apply scientific
methods to that.
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OK, but I think the main
obstacle to dealing with it,
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I think is, that once you say
can one still make predictions,
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and certainly in economics
predictions, as you know,
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are very important, they exist.
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So the fear is that
once one allows
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for fundamental uncertainty, not
risk, fundamental uncertainty,
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that predictions
become impossible,
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Well, that's true, many
predictions will not
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be possible, and that's
one of the major mistakes
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I would say in modern
social theories,
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in economics in particular.
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That we have the pretence to
be able to predict in broader,
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great detail, but economics is
not like physics, for instance.
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You cannot predict
in great detail,
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but that does not mean that you
cannot try to understand how
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people behave under uncertainty.
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Can you give me an
example, how then, you
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come to understanding without
being able to make predictions?
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Well, there are
many, many examples.
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So let's take one
from economics and one
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from soccer, for instance.
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I said, well it's impossible to
make a very precise prediction,
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but you can understand,
you can analyse,
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you can describe patterns.
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For instance, in
economics we know
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that we have business cycles.
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So that we have
fluctuations over time,
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and you can have a theory that
generates such fluctuations,
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but it is impossible
to precisely predict
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the specific course of a cycle.
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And now my example--
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-It's overwhelming, yes?
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---of soccer.
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Soccer, or something
similar, that's
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a game between 11
players on both sides
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and it's very
difficult to predict
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what will happen in any
second of that game,
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not difficult,
that's impossible.
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But you know, you immediately
recognise whether this is
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a game of soccer or whether,
let's say a baseball game,
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for instance in a soccer
game you have one player,
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the keeper, that's allowed to
take the ball in his hands.
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You will immediately
recognise that.
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-Yes, I agree that's a
pattern, but still going back
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to the business cycles, and
the first example you gave,
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everyday predictions.
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We still use models so some
how these models have value
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and we attach value to them.
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So we make predictions, even
though uncertainty exists,
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or I would still say
that these models somehow
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have to be useful because
we continue to use them.
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-Well I think that in the
past what we have done
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is to give too much attention
to models, as it were,
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and to pretend that these models
really described reality were
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a kind of an objective truth,
but it is true that, as I said,
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we have to deal with uncertainty
since mankind existed.
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And one of the things
that we have developed
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is indeed using models
and making forecasts
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and using risk management.
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My problem is that we have
given too much attention to that
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and that we almost need
[? length ?] that there
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are other ways of looking
and dealing with uncertainty.
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-So if I may try to
summarise what you said,
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models are still
useful, but we have
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to understand that in
a world of uncertainty
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the usefulness of some model
is different than making
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or assuming that you
can make an accurate
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prediction of the future.
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-That's right, and
it's very important
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that we look also at
other methods that people
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and other things that
people have developed
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to deal with that uncertainty,
like developing conventions,
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heuristics, trial and error
method, evolution, ethics,
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the moral systems, and
all kinds of other things.
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So you need a
multi-disciplinary approach.
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-There I tend to agree
and because I think debate
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once one allows for
uncertainty, as we both agree
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that is important,
even though we differ
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as to what extent
models can be used.
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I think where we meet is
that debate is necessary
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because one constantly
has to convince
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each other of the arguments
how to deal with uncertainty.
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So in that sense, I think it
certainly not only exists,
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but it requires debate,
like we just did.
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